Introduction: Are you very familiar with this kind of life scene: wearing sportswear containing spandex, driving a new energy lithium battery car, using biodegradable plastic bags to purchase goods at the supermarket… These seemingly unrelated items have one thing in common, which is that the raw materials all contain a special substance – BDO (1,4-butanediol). As an important basic organic and fine chemical raw material, BDO can be used to produce various products such as spandex, cosmetics, biodegradable materials, lithium battery solvents, etc. It is one of the fastest-growing chemical products in the world. Against the backdrop of “dual carbon” and “plastic restrictions”, there is strong demand for biodegradable materials, new energy batteries, and other fields, driving the basic raw material 1,4-butanediol (BDO) to become an investment hotspot, and BDO plans to significantly expand production capacity.
| Gamma-PGA (gamma polyglutamic acid) |
Firstly, let’s review the trend of the BDO market in 2023. The domestic BDO market experienced a high decline in 2023, with an average price of 9780 yuan/ton at the beginning of the year and 9535 yuan/ton at the end of the year, a decrease of 2.50%. From the BDO price trend chart, it can be seen that the highest price of BDO in 2023 occurred at the end of February, with a highest price of 14033 yuan/ton. The lowest price of BDO occurred at the end of the year, with a lowest price of 9535 yuan/ton and a maximum amplitude of 47.17%. Overall, the domestic BDO trend fluctuated sharply in the first half of the year, with the second half experiencing mainly lower fluctuations.
Specifically, at the beginning of 2023, driven by the high prices of equipment maintenance and bidding by production enterprises, as well as the gradual recovery of demand and strong overall support from downstream industries, the market mostly operated upwards; Traders have limited supply of goods and most of them are closed without reporting. In addition, the good export market has driven the overall upward trend of the domestic BDO market. As major production enterprises restart their facilities one after another, there is a significant increase in supply side growth, and there is a bearish situation at the BDO supply level. Downstream industry costs are under pressure, and the BDO market is “bottoming out”.
In the second quarter, in order to meet the production needs of the industrial chain, some external procurement bidding prices were relatively high, which once boosted the market atmosphere. On the eve of Labor Day, some downstream companies are chasing prices to stock up, and holding manufacturers have a strong willingness to sell at low prices, resulting in a strong upward market focus. With the restart of maintenance equipment, the supply has increased, and the downstream NMP industry has followed the downward trend of the raw material market. The TPU and PU slurry load in the polyurethane field is around 40-50%. The enthusiasm for the PBAT industry to start construction is not high, which suppresses the enthusiasm for raw material procurement.
In the third quarter, the BDO market was mainly constrained by narrow consolidation of supply and demand contradictions, with enterprise equipment maintenance being the main focus and operating rates at a low level. However, the peak demand season of “Golden September and Silver October” did not occur, and the market center of gravity was operating at the lower end. In the fourth quarter, the stable operation of new production capacity devices and the gradual launch of new production capacity products in the market have resulted in a bearish market mentality, with no positive news on the demand side. As a result, the BDO market price has fallen to a low level in recent years.
On the supply side, in recent years, BDO has added more production capacity, and the industry will usher in a rapid expansion cycle. In 2022, China’s BDO production capacity was 2.763 million tons. It is expected that from 2024 to 2025, there will be approximately 1.6 million tons and 500000 tons of new BDO production capacity with high certainty in China. By the end of 2024, the domestic BDO production capacity will reach 6 million tons. The rapid expansion of production capacity on the supply side will exacerbate the supply-demand contradiction and have a negative impact on the supply side.
According to international standards, a capacity utilization rate exceeding 90% is considered insufficient capacity, 79% -90% is considered normal, below 79% is considered overcapacity, and below 75% is considered severe overcapacity. According to data from Business Society, the operating rate of the BDO industry will remain at 60-70% in 2023, indicating severe overcapacity in the industry. Some companies are about to go public and strive to fully connect the four major industrial chains from BDO to spandex, lithium battery solvents, biodegradable materials and engineering plastics, and pharmaceutical intermediates. The continuous improvement of integrated projects in the entire industrial chain will effectively improve the overcapacity situation in the BDO industry.
On the demand side, downstream BDO mainly includes tetrahydrofuran (THF), polybutylene terephthalate (PBT), polybutylene terephthalate (PBAT), polybutylene succinate (PBS), and γ- Products such as butyrolactone (GBL). THF/PTMEG (polytetrahydrofuran) is mainly used for the production of spandex and is the main downstream application area of BDO, accounting for nearly 52% of consumption. Engineering plastic PBT and high boiling organic solvent GBL are currently the other two main consumption areas of BDO, accounting for 24.5% and 11.8% respectively.
The BDO plant that has been put into operation currently mainly uses the acetylene aldehyde method, accounting for 93.62% of the production capacity. The acetylene aldehyde method uses calcium carbide and methanol as raw materials, and producing 1 ton of BDO requires 1.15 tons of calcium carbide and 0.91 tons of methanol. The BDO production cost formula is: 1.15 calcium carbide+0.91 methanol+3500 unit labor. As of the end of 2023, the price of calcium carbide calculated by Business Society was 2983 yuan/ton, and the price of methanol was 2500 yuan/ton (slightly lower in the northwest region). The calculated production cost of BDO was about 9200 yuan/ton. Currently, the production enterprise’s external quotation is close to the cost line, and profits are severely compressed.
At present, the BDO price has fallen to the cost line, and the operating rate of the equipment remains at 60%, resulting in severe overcapacity. Some companies are about to go public and are striving to fully connect the four major industrial chains from BDO to spandex, lithium battery solvents, biodegradable materials and engineering plastics, and pharmaceutical intermediates. The continuous improvement of integrated projects in the entire industrial chain will effectively improve the overcapacity situation in the BDO industry. It is expected that the sluggish BDO market will change in the near future.
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